It goes without saying that if your organisation pledges to become more customer-centric, you need to innovate your business model through a customer-centric lens. Customer-Centricity is all about the organisations ‘way of work’ or the ‘business system’ that enables the business to design and to deliver a unique, distinctive and consistent customer experience in order to Acquire, Retain and Develop targeted customer Efficiently. An organisation seeking to develop customer-centric capabilities must be willing and able to change its organisation structure, its measures and its employee and distribution incentives to focus on long term business success.

The design of a customer-centric strategy requires an organisation to deeply understand its current customer-centric capability (its departure point on the transformational journey), the nature of customer-centricity to which it aspires, the action and implementation priorities to bridge the gap between the current and the ‘to be’ state as well as the business benefit (financial uplift) derived from this improved level of customer centric capability.

This infographic helps explain the core components of the transformational journey and the customer-strategy, and is based upon the SCHEMA Customer Management Framework which is the methodology we use to drive customer-centric transformation

To be customer-centric requires business capability to design and to consistently deliver a unique and distinctive customer experience to a selected set of customers in order to acquire, retain and to develop them efficiently.

I was privileged to be taught by the late Dr Russell Ackoff at The Wharton School and he re-enforced my long held belief that one of the major challenges organisations face when trying to transform their business models to become more customer-centric is a lack of systems thinking. Dr Ackoff produced extensive research, insights and knowledge into how systems thinking is the only way to approach organisational development. He explained that many of the challenges we face in trying to understand our organisations such that we can transform them, come from using analytical thinking.

Systems thinking is an approach that views the organisation as a whole (end-to-end) comprised of many parts (functions/silos), yet, at the same time, it is more than the sum of the individual parts. (To deliver a unique and consistent experience requires the organisation to be joined-up – to operate as a single seamless entity.)

Dr Ackoff added that a system is also defined by the function it fulfils in the wider system – this speaks to our organisational role in society and community and embraces the stakeholder universe including, in addition to society, partners, employees, customers and investors.

Dr Ackoff regularly likened the idea of a system to the human body or to a motor-car. He explained the 3 principles of the system being defined by the function it fulfils in the wider system (universe) as follows:-

Each part affects the behaviour of the whole. (If the heart and lungs are not functioning correctly then this will affect the well-being of the entire body) – think Leadership Team?

No part has an independent effect on the overall system ( The ability for the muscles to get someone to walk in a straight line will depend on the balance maintained by the inner ear)

The system itself has properties which none of the parts have (If a hand were cut off, the hand would be unable to write. It is the whole system, the whole body, that enables the hand to write)

These principles highlight the challenge many organisations face as they aspire to develop the capability to deliver unique and distinctive experiences. Trying to understand the organisation capability by analysing and restructuring various operating entities in isolation (e.g. let’s optimise the contact centre and make it really efficient.) doesn’t lead to the transformation required. Sadly, in the above-mentioned contact centre example, ‘efficiency’ measures such as average handling time and # calls answered per day by agent, are the antithesis of customer-centric capability – a customer may want information or may want a problem solved – he/she is not interested in the fact that the agent may have an average handling time target of 2min, 30 seconds, for example.

Taking the analogy further the parts (functions) of the organisation need to mesh together, to be joined up in such a way that they operate seamlessly – to be designed in such a way that they’re supportive of the strategic outcome of the business. The linkages between and across areas of specialisation need to be refined and appropriate for the intended experience. It’s the view and understanding of the whole organisational system as well as an understanding of the universe that allows the organisation to determine where it wants to create it’s ‘high contrast signature experience’ – where it wants to stand head and shoulders above the competition, where it is going to be unique. No business can be the best at absolutely everything.

As per Dr Ackoff, this is akin to taking apart each and every motor car in an attempt, through analysis, to find the best engine, best transmission, best steering, best braking system, best suspension……..best everything. Trying to put all of these ‘best’ parts together would result in an absolute mess as nothing would fit. Trying to scrutinise every part of the system and aggregate an understanding of the parts, doesn’t allow an understanding of the whole. Applying the principles of systems thinking allows an understanding of how the pieces/parts fit together.

I downloaded an infographic http://bit.ly/1jtr5l3 this morning from Customer Management Exchange Group that shows the Top 5 Areas of Investment for Marketing Leaders and how investment priorities have changed for strategic marketers over the last 12 months

Basically – I’m shocked!

Allow me to qualify by acknowledging that I don’t have the formal definitions of each of the abovementioned investment areas (e.g. What makes up Marketing Effectiveness) and, aside from the infographic I haven’t seen any of the underlying research. I am only reacting to the infographic.

As somebody who evangelises a customer-centric business model as one of the only ways of building meaningful competitive advantage for most organisations today, my assessment is that these priorities are a ‘step backwards.’ My comments on a couple of these 2014 investment priorities

Let’s begin at Investment Priority #5 for 2014 – Customer Acquisition. World markets remain under pressure in most geographies. The majority of organisations still generate the bulk of their profits through a product-centric mindset and we know there are cracks in the product-centri c mindset. Amongst others, commodisation is increasingly common due to technology enablement, product/service life cycles are shorter, customers are smarter, products are available anywhere and everywhere due to globalisation and de-regulation of industries. Customer trust in government and corporate remains low. We all know that it costs more to ‘Acquire’ than it does to ‘Retain.’ Why would investment priorities only highlight 1 of the drivers (Customer Acquisition) of customer value management, the others being Retention, Efficiency (cost-to serve understanding) and Penetration (customer development, x-sell &amp; up-sell)

Maybe, just maybe, Investment Priority #4 for 2014 – Marketing Effectiveness addresses the balance across these 4 drivers of customer value management. Maybe, Marketing Effectiveness implies a focus on Retention, Customer Development and Cost to Serve Efficiency in addition to Customer Acquisition.

I’m astounded that Investment Priority#4 for 2013 – Customer Experience, has dropped off the priority schedule. Is this because organisations are finding it too difficult to enable cross functional capability to design and to deliver a unique, distinctive and consistent customer experience? Is this because executive teams are once again becoming increasingly short term focussed? There will always be tension between the need to deliver profits ‘tomorrow’ and the need to develop sustainability for 6 months, 1 year, 5 years, 10 years, 20 years ahead. Maybe organisations are feeling that Customer Experience is too complicated and that it’s easier to talk about than to operationalise. Customer Experience requires cross-functional working. It requires the breakdown of silos and a change in the operating model. A customer-centric business model doesn’t change the importance of organisational performance measurement but it does change what, when and how business performance is measured. Maybe this is why Investment Priority#2 for 2013 – Marketing Measurement, Accountability & ROI, has also fallen of the 2014 Priority list.

The other notable difference is that Investment Priority#1 for 2013 – Future Thinking, Trend watching and Forecasting appears nowhere in 2014. My concern is that the 2014 Priorities are therefore not indicating any real commitment to business model innovation.

It’s extraordinarily easy to make uneconomic investments in customer experience – much of the time and money ‘invested’ is wasted because organisations fail to understand the criticality of systems thinking and the need for ‘silo-busting.’ They also focus on how they ‘deliver’ experiences rather than understanding how people ‘have’ experiences. It is how people ‘have’ an experience that influences the choices they make in the pursuit of what they really want. The culprits that lead to uneconomic investments in customer experience include the following:-

o Reliance on customer satisfaction measures – customer experience investments only pay off when behaviour changes – satisfaction is not an emotional state that drives behaviour
o Voice of the Customer – Henry Ford said “If I had asked customers what they wanted, all we’d have is faster horses’
o Touchpoint Mapping – The highest impact insights and opportunities exist at non-touchpoints – companies ‘deliver’ an experience at touchpoints e.g. dropping car off for service at service desk, getting lift to work, getting a call indicating status of service……………….etc etc etc. People have experiences at non-touchpoints………e.g. frame of mind based upon past service experience BEFORE car is dropped off for service, having to wait for a driver to deliver them to work, having to arrange their day without access to mobility because car is in for service, having to arrange collection of vehicle…………etc etc etc. It’s important to consider and recognise behavioural pathways – what do these events make customers think, feel and what does this influence them to do?
o Service Level Improvement – Incremental improvements in service quality generally do not get customers’ attention or influence behaviour
o ‘Fixing’ the front line – The experience customers have is a product of deeply entrenched organisational behaviour. Training and motivating front line employees does not address this

Yeah right! I had a really interesting discussion with a prospective client recently. He is the MD of a multi franchise vehicle business. Successful? – no doubt. Customer-Centric? – I don’t think so. Yet he was adamant he had ‘customer-centricity’ under control. They were busy hiring someone who was going to drive this initiative. This is a classic example of a refusal to admit to the current reality. A refusal to fully understand what’s wrong with the current way they’re running the operations. A refusal to really understand what customer-centricity is all about.
Will these refusals lead to business failure? I certainly don’t believe so. But I do know that they will lead to lost opportunity. And what really agitates me is a verbal commitment made to developing themselves as an internationally recognised exemplar of customer experience. How, I ask with tears in my eyes? How are they going to enable disruptive change by doing more of what they’ve always been doing? Time will tell. I only wish that people would stop making bold statements that they’re never going to deliver upon, unless they develop a REAL understanding of their current reality, a REAL understanding of the reality to which they aspire, and REAL capacity for change.

In a recently published article (MIT Sloan Management Review – How to Become a Sustainable Company)the authors point to a study that supports the view that ‘high sustainability’ companies significantly outperformed their counterparts over an 18 year period in terms of both stock market and accounting criteria, such as return on assets and return on equity. Also, stock market performance was higher and there was lower performance volatility. We can therefore conclude that sustainability makes good business sense.
The term ‘sustainable company’ is spoken about and referred to fairly frequently these days. At the core of this trend is the fact that consumers and the general public are not satisfied with businesses that focus solely on short-term profit maximisation. People want businesses to be far more considerate of broad based human needs.
In this context ‘sustainability’ refers to a business philosophy based on balancing financial, social and environmental considerations.
I am a firm believer and supporter of ‘sustainable enterprise’ – I also have this expectation that if a business can balance financial, social and environmental issues then surely they should add ‘customer experience’ to the list? After all, why waste the energy and effort to address social and environmental considerations (which ‘speak’ to us and can therefore be used to create greater levels of loyalty and advocacy) if they don’t design and deliver a differentiated customer experience.
Sadly, I’m a customer of a couple of ‘sustainable’ companies that deliver a customer experience that is mediocre at best and downright unacceptable at worst. This got me thinking from two perspectives – firstly, building organisational capability for sustainability is similar to building organisational capability to deliver differentiated experiences. Secondly, if an organisation is committed to ‘sustainability’ yet doesn’t focus on customer experience, should we be more accepting of mediocrity in delivery of those customer experiences? I say NO! NO! NO! In fact, Customer Experience and Sustainability should go hand in hand – one without the other is indicative of opposing forces.
Your thoughts?

I’m guilty! I admit that I’m a customer-centric evangelist because quite frankly, how else can you build meaningful competitive advantage? Customer-centricity is all about differentiation and it’s almost impossible to sustain differentiation around product, price and distribution footprint. But you can sustain differentiation around your customer knowledge, insights and understanding.

Here are 3 questions designed to get you thinking a little differently about the criticality of developing customer-centric capability within your organisation. These ideas are attributed to Don Peppers & Martha Rogers of Peppers & Rogers Group, whom I worked with very briefly around 11 years ago.

1) Who is the one stakeholder, whom if you maximised the return thereof, would benefit ALL stakeholders? So think about this – there are generally 5 major stakeholders in businesses today – society, partners, investors, customers and employees. Maximising the return for the investor is not necessarily good for the customer! Maximising the return for the employees doesn’t mean ALL other stakeholders will benefit. Maximising the return for the Customer, on the other hand, certainly does benefit all other stakeholders. This is why the principles of customer-centricity are so important. If an organisation is unable to propagate a supply-demand chain then they are unable to supports investors and all other stakeholders.

2) Would you agree that customers create 100% of business value in almost all cases? Customers create value for businesses every quarter by purchasing products and services. They also create value in another way which is referred to as lifetime value (LTV). LTV is based upon their intention to continue doing business with, and paying money to the organisation. That LTV goes up and down in value, as does a stock/share portfolio. Any reduction, or potential reduction, in that value (brought about possibly through a poor engagement or experience) is bad news for the organisation. This level of understanding and insight of that value change is generally not available within organisations so this reduction in value is not reported to shareholders , albeit that it is akin to the company reporting lower earnings which in almost all cases results in company stock/shares losing value. My friends at Peppers & Rogers have a metric for this which they refer to as ‘Return on Customer’ and this metric is designed to capture both types of value created (actual and LTV) to balance the short term/long term impact of customer value. ROC = (Profit made on customer today + change in LTV)/Initial/beginning LTV.

3) What do shareholders & investors really want? Most shareholders and investors want confidence that leadership is able to grow a company organically. That means that the organisation will have developed capabilities to Acquire customers, to Retain them and keep them buying from the business, to grow them and to get them to buy more from the business. They’d also want confidence that leadership is able to guide investment and understand the cost-to-serve different customer cohorts/segments to best manage financial return. If the business can demonstrate these capabilities then they are providing REAL value to customers which means they’re providing real value to shareholders/investors at the same time

Customers are a scarce asset. They are valuable and unique. They are measurable. They are the biggest limitation to growth and to understand this will impact the decisions we make.

So…………within your organisations, if customers are the most important asset in your business, who is managing them as such. What operational framework/ architecture/ business model are you using to optimise that asset? Who is tracking the value of the customer today and the value of the customer tomorrow? What does your customer dashboard look like?